States agree to have two rates for GST

New Delhi: The states today decided to have two rates for the proposed Goods and Services Tax — one standard rate and another a lower rate for essential items — scheduled to be introduced from April 1, 2010. "We have reached a consensus so far as states' GST is concerned. There will be two rates, one standard rate and the other a lower rate for essential items," Value Added Tax Panel (VAT) chairman Asim Dasgupta told reporters after an empowered group of state finance ministers and officials of the union finance ministry met here.

He said there would be a list of exempted items and a special GST rate for precious metals. However, there is no clarity on whether the centre would also have two GST rates. Dasgupta said he cannot speak on behalf of the central government but it would likely have a "good deal of conformity" with state-level GST. Consensus is already there on having a dual model of GST — separate GST for the centre and the states. GST proposes to create a common market and replace excise duty and service tax at the centre and VAT and local taxes at the states' level.

Another important decision taken at today's meeting was forming a joint working group comprising officials of the finance and other concerned ministries at the centre and finance secretaries or commissioners of commercial taxes at the state level to decide on a framework for the constitutional amendment and model legislation on GST for the centre and states in a time-bound manner. Dasgupta said the joint working group would submit a report in about two months. "We think we do not have any time to lose. Therefore, the framework for a constitutional amendment is necessary as soon as possible, in a time-bound manner," he said.

However, while Dasgupta exuded confidence and commitment for introducing GST as slated, various states including Madhya Pradesh expressed reservations over it, saying it should not be introduced in haste.